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Can Malaysia Rise As The Next Semiconductor Powerhouse Amidst Rising China-US Tech Tensions?

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In the ever-escalating U.S.-China tech rivalry, Malaysia has positioned itself as a pivotal center for semiconductor manufacturing, attracting major global players.

The Shift: Stepping into the spotlight amidst the intensifying U.S.-China tech battle, Malaysia has emerged as a critical player in semiconductor manufacturing. With well-established infrastructure and a skilled workforce, the nation has magnetized global chip giants, as per CNBC.

Malaysia’s specialization in the “back end” of semiconductor manufacturing, encompassing assembly, testing, and packaging, has been a linchpin in its ascension. Major players in the chip industry such as Intel Corp, INTC, GlobalFoundries, and Infineon have poured substantial investments into Malaysia.

For instance, Intel has earmarked over $7 billion for a chip packaging and testing facility in Malaysia, slated to kick off production in 2024. Simultaneously, GlobalFoundries has rooted itself in Penang, while Infineon is gearing up to construct its third wafer fabrication module in Kulim.

“Our decision to invest in Malaysia is underpinned by its diverse talent pool, robust infrastructure, and resilient supply chain,” stated Aik Kean Chong, the managing director of Intel Malaysia, according to the report.

Data from the Malaysian Investment Development Authority unveils that Malaysia holds a 13% share of the global market for chip packaging, assembly, and testing services. Despite subdued global chip demand, the nation’s semiconductor exports saw a 0.03% uptick to 387.45 billion Malaysian ringgit ($81.4 billion) in 2023.

“Malaysia and Asia at large are poised to reap benefits from the China-U.S. tech tussle, where advanced semiconductor chips are wielded as tools to establish global tech supremacy,” suggests May-Ann Lim, director of the data governance practice at the public policy consultancy Access Partnership.

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Capitalizing on its strategic location and skilled workforce, Malaysia has emerged as the go-to choice for chip firms seeking operational diversification amid the U.S.-China tech rift. Yet, the lingering challenge of brain drain persists as skilled professionals seek greener pastures overseas.

Significance: The U.S.-China tech tensions have catalyzed a seismic shuffle in the semiconductor realm, with countries like Japan and Singapore assuming pivotal roles. Taiwanese chip entities are progressively expanding their footprint in Japan, reshaping the global semiconductor domain.

Concurrently, Singapore’s state-owned investment entity Temasek is engaging in discussions with the AI developer OpenAI regarding potential investments, signaling Singapore’s escalating influence in the global tech arena.

However, the global semiconductor sphere faces potential disruptions, exemplified by the recent earthquake in Taiwan, which could reverberate through chip production and, consequently, AI advancement, as highlighted by tech analyst Gene Munster.

Amid these developments, Taiwan Semiconductor TSM ponders boosting its advanced chip packaging capacity in Japan, a move with far-reaching implications for the global semiconductor landscape.

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